With a user-friendly incorporation process and a uniquely favorable business environment, Singapore is a common incorporation destination for first-time entrepreneurs.
Here we set out the key concepts you need to know when starting a corporation in Singapore: We explain the key features of a limited company in Singapore, the role of shareholders, directors, and company secretaries, the process for incorporation, and ongoing compliance obligations.
This guide is designed especially for first-time entrepreneurs in Singapore.
What is a limited company?
A limited company is a business structure that creates a distinct legal personality for a business. It is the limited company that is ‘incorporated’ when it is first set up by an entrepreneur in Singapore. The company is ‘limited’ as the financial liability of the shareholders of the company is limited by their respective shareholding.
The key features of limited companies include:
- They have one or more shareholders. Once registered, these individuals are known as the ‘members’ of the company
- They have one or more directors. The directors have overall responsibility for managing the affairs of the company
- They can enter into contracts in their own name
- They exist in perpetuity, irrespective of the resignation of specific directors, or the sale of shares by shareholders.
The operation of a Singapore company is governed by the company constitution (more on this below), as well as applicable law, such as the Singapore Companies Act.
Singapore limited companies come in several forms including private companies limited by shares (20-50 shareholders), exempt private companies (for those with fewer than 20 shareholders), and public limited companies (with more than 50 shareholders).
Below we set out the key roles as they relate to a Singapore company — the directors, shareholders, and the company secretary, before looking at the incorporation process.
A private limited company in Singapore must have at least one director. All directors must be natural persons, of full legal capacity, over 18 years of age, and not disqualified from being a director (such as having a conviction for a dishonesty offense). Note, Singapore does not permit companies themselves to be directors of Singapore companies.
In addition, at least one of the directors must be a resident in Singapore and hold Singapore citizenship, permanent residency, an employment pass, or an EntrePass. Some companies choose to appoint a professional director in Singapore to meet this requirement (commonly known as a ‘nominee director’).
The directors have overall responsibility for managing the affairs of the company. They may manage the company directly themselves, or they may hire professional managers to do so.
Directors in Singapore have a range of obligations under the law.
- A duty to act in good faith, and in the interests of the company as a whole
- A duty not to delegate their powers without due authorization
- A duty to exercise care, skill, and diligence
- A duty not to improperly profit from their position as a director of the company
- A duty not to allow the company to trade while insolvent.
Directors who breach their duties may be liable for civil or criminal penalties or may be disqualified from being a director. Note also, that a director will also be liable for any debts of the company where they have personally guaranteed those debts.
Shares and shareholders
A private limited company in Singapore must have at least one ordinary shareholder: A shareholder purchases an ownership interest in the company at a set price. This ownership interest is known as a ‘share’.
The minimum share capital of a Singapore company must be at least S$1.
The shareholders have ultimate control over a company, through the ability to appoint directors, the ability to replace directors, and the ability to call a general meeting and vote on crucial matters to do with the company (such as whether it should be wound up). They have a right to dividends, where a profit is to be distributed, and a right to proceeds in the case of company liquidation.
The precise role of shareholders and directors in the relationship between them is set out in the fundamental document of the company known as the ‘company constitution’.
All private limited companies in Singapore must have a company secretary resident in Singapore. The company secretary has key responsibilities under the Companies Act and in the constitution of the company. The company secretary has responsibilities for:
- Scheduling general meetings
- Recording the minutes of general meetings
- Ensuring the company maintains communication between the directors and shareholders of the company
- Recording share transfers.
In Singapore, the company secretary must be appointed within 6-months of incorporating the company.
The company constitution
Previously, companies in Singapore required two separate legal documents at their foundation: The ‘articles of association’ and the ‘memorandum’. Since 2014, these documents have been replaced with the ‘company constitution’. The company constitution sets out the fundamental rules of the company, including the relationship between directors and shareholders. It will set out the specific rules for the holding of general meetings, and the process for appointing and replacing directors.
The proposed company constitution must be submitted to the Accounting and Corporate Regulatory Authority (ACRA) at the time of application for company incorporation.
The Singapore incorporation process
To incorporate a Singapore company, a first-time entrepreneur should proceed as follows:
- Work out the key features of the proposed company: E.g., the number of shareholders and directors, the physical address, the initial share capital, and who will fulfill the local director requirement;
- Choose a company name, and apply for approval. The name must not infringe on the intellectual property of other companies in Singapore;
- Apply for company incorporation with ACRA with the required forms, including ‘consent to act’ forms for directors and the company secretary.
The compliance obligations of an entrepreneur do not end at company incorporation. The business then needs to consider:
- Goods and Services Tax (GST) registration. This is generally a requirement for businesses in Singapore with revenue of more than $1 million annually
- Business licensing. Where the business is in certain industries, such as travel or real estate, they may need a special license
- Tax. You need to ensure that corporate income taxes are filed as required and that proper accounts are maintained;
- Annual returns. These compliance returns must be filed with ACRA every year detailing core changes in the company.
The process of incorporating a Singapore company is straightforward and user-friendly for first
-time entrepreneurs. However, when incorporating a Singapore company, it is important to pay attention to those elements that are different than in other jurisdictions: Such as the requirement that companies have a local Singapore director, or the requirement to register for GST once a certain turnover is reached.